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High commodity prices are high on the agenda. American multinational Mondelēz has felt this keenly, particularly in the impact it has had on customer disruption in Europe, where they have faced tough negotiations with retailers over prices.
In its newly released Q1 results, volume sales for Europe are still down. But the company says the many of the negotiations are now sorted.
Success in Europe?
Growth for Mondelēz’s Europe sales was up 4.4%. While this growth was positive, it relied on price, and was significantly offset by a decline in volume/mix.
In terms of volume/mix, Mondelēz has seen significant decline in almost all markets, with a contraction of -3.5% in Europe (the only segment that bucks the trend is emerging markets, which saw a volume growth of 0.1% and was largely successful for Mondelēz across the board).
Since 2022, Mondelēz have experienced customer disruption in Europe, with disagreements over pricing slowing down negotiations between the multinational and European retailers. One of the reasons for the low volume growth, suggested Mondelēz CFO Luca Zaramella in an earnings call, is this customer disruption in the European market.
Despite this, however, core categories including chocolates, biscuits and baked snacks are ‘still demonstrating relatively more resilience and lower elasticity than the broader food universe,’ said CEO Dirk Van De Put, and this is particularly true for these categories in Europe where consumer confidence is improving.
“While volume growth has slowed, the Chocolate and Biscuit categories are holding better than the broader FMCG landscape and we’re hearing increased optimism about the go-forward economic outlook.”
According to CFO Zaramella, many of the negotiations with European retailers that have been causing disruption are now complete. “We have now landed the vast majority of pricing in Europe. One customer alliance is still ongoing, which will cause some additional disruption in Q2, but the business remains in line with our expectations,” he said.
For Europe, predicted Van De Put, sales will see a recuperation now that many of the negotiations are complete.
The price of cocoa
One category that is particularly strong for Europe is chocolate, with Cadbury and Milka showing solid growth. This is despite the recent rapid rise in the price of cocoa, and suggestions that these increases will be passed onto consumers.
In the realm of cocoa, said Zaramella, Mondelēz is covered for at least twelve months, and has teams analysing the cocoa market consistently. Mondelēz, who owns chocolate brands such as Cadbury, Milka, Lacta and Toblerone, has locked cocoa for the entirety of 2024, meaning that cocoa for the year has already been bought in the form of futures.
Mondelēz believes that the price of cocoa will go down later this year, when the data for new crops begins to become available. However, if prices remain high, suggested Zaramella, the company is committed to its current price points.
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